Is Absolute Software Corporation (TSE:ABST) Potentially Undervalued?

While Absolute Software Corporation (TSE:ABST) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the TSX. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Absolute Software’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Absolute Software

What's the opportunity in Absolute Software?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16% below my intrinsic value, which means if you buy Absolute Software today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CA$18.93, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Absolute Software’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Absolute Software?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Absolute Software, at least in the near future.

What this means for you:

Are you a shareholder? ABST seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ABST for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ABST should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Absolute Software has 3 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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